NOTE 5 - STOCK-BASED COMPENSATION



Employee Stock Purchase Plan



Under the Company’s Employee Stock Purchase Plan (“ESPP”), employees are able to acquire shares of common stock at 85% of the price at the end of each current quarterly plan term.  The most recent term ended September 30, 2020.  The ESPP is considered compensatory under current Internal Revenue Service rules.  At September 30, 2020, after giving effect to the shares issued as of that date, 76,154 shares remain available for future issuance under the ESPP.



2011 Executive Incentive Compensation Plan



On March 28, 2011 the Board adopted and on May 19, 2011 the Company’s shareholders approved the Company’s 2011 Executive Incentive Compensation Plan (“2011 Incentive Plan”).  The 2011 Incentive Plan authorizes incentive awards to officers, key employees and non-employee directors in the form of options (incentive and non-qualified), stock appreciation rights, restricted stock, restricted stock units, performance stock units (“deferred stock”), performance cash units, and other awards in stock, cash, or a combination of stock and cash.  The 2011 Incentive Plan, as amended, allows the issuance of up to 2,500,000 shares of common stock. 



At September 30, 2020,  429,432 shares have been issued under the 2011 Incentive Plan, 1,509,623 shares are subject to currently outstanding options, deferred stock awards, and unvested restricted stock units, and 560,945 shares are eligible for grant under future awards.



Changes in Stock Options Outstanding



The following table summarizes changes in the number of outstanding stock options under the 2011 Incentive Plan over the period December 31, 2019 to September 30, 2020:  





The aggregate intrinsic value of all options (the amount by which the market price of the stock on the last day of the period exceeded the market price of the stock on the date of grant) outstanding at September 30, 2020 was $193,000.  The intrinsic value of all options exercised during the nine months ended September 30, 2020 was $18,000. Net cash proceeds from the exercise of all stock options were $0 in each of the nine-month periods ended September 30, 2020 and 2019.



Changes in Deferred Stock Outstanding



The following table summarizes the changes in the number of deferred stock shares under the 2011 Incentive Plan over the period December 31, 2019 to September 30, 2020:





Compensation Expense



Share-based compensation expense recognized for the nine-months ended September 30, 2020 was $320,000 before income taxes and $253,000 after income taxes. Share-based compensation expense recognized for the nine-months ended September 30,  2019 was $276,000 before income taxes and $218,000 after income taxes.  Unrecognized compensation expense for the Company’s plans was $662,000 at September 30, 2020 and is expected to be recognized over a weighted-average period of 2.6 years.  Share-based compensation expense is recorded as a part of selling, general and administrative expenses.